Report: Meat and dairy giants face $24bn of climate-related losses by 2030
The world’s 40 largest meat and dairy companies are likely to lose almost $24bn in pre-tax earnings by the end of the decade, due to poor planning for climate-related risks.
That is according to a new report from investor coalition FAIRR, which convenes members with more than $70trn of assets under management in a drive to improve sustainability-related engagement between investors and companies in the protein sectors.
The analysis reveals that the 40 companies’ ‘business-as-usual’ plans are aligned with a global warming pathway of 2C or more – a level which would render vast swathes of the planet ‘unliveable’ by 2100 according to climate scientists.
In this scenario, FAIRR forecasts, each company would see an average of a 7% reduction in profit margins, representing $27.3bn overall. The hit would be harder for North American companies, which can expect an average 11% decrease in profit margins.
FAIRR is warning that this level of decline in profits would push half of the companies it assesses into net operating losses, including the US’s largest meat producer Tyson Foods and largest egg producer Cal-Maine.
Profits would be hit, FAIRR’s report explains, by physical climate impacts resulting in higher feed and fertilizer prices, plus increased animal sickness and mortality rates. There are also transition-related and regulation-related risks, such as carbon taxes.
FAIRR has stated that some of this risk could be avoided with more robust risk assessments – and action according to the findings. Yet just six of the 40 companies assessed, 15%, have conducted and publicly published a climate scenario analysis. Scenario analyses enable companies to assess risks and opportunities in various future warming and regulatory scenarios.
While more than half of the companies acknowledge risks relating to increased crop prices, only one quarter disclose plans for mitigating this risk. Moreover, two-thirds do not disclose the potential impact of heat stress on operations or supply chains.
The report concludes with recommendations for investors and financial institutions. These include engaging with invested companies and projects to collect better climate risk data and information on other environmental, social and governance (ESG) topics; divesting from firms lagging behind and exploring alternative investment opportunities in alternative proteins and methane-reducing feed additives.
FAIRR’s chair and founder Jeremy Coller said: “As investors start to factor climate risk into their long-term valuations of livestock companies, the allure of investing in meat and dairy could be approaching an expiration date unless companies take action to address climate risk. These figures highlight the urgent need for meat companies to adapt swiftly, or pay the financial price with investors increasingly not willing to bear the financial risk of investing in these companies.
“To mitigate the clear risk to the bottom line, companies should take a scientific approach and explore the best available strategies, including diversifying products and portfolios towards plant-based alternatives.”
The new report from FAIRR builds on another published late last year, showing that most major meat, seafood, egg and dairy companies are not measuring or tackling water stress or deforestation risks in their value chains.
Related article: Eight top tips for reporting environmental risk and becoming a more climate-resilient business
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The meat and dairy industry are unsustainable and unethical, and I’m not surprised that there’s a growing demographic that is vegetarian or vegan. And with its parallel industries of animal products, like leather, there are so many companies that are offering vegan options in clothing too! Saw a Spanish shoe brand the other day that uses vegan leather and an on demand production model. There’s really no excuse anymore to continue supporting the cattle industries. They’re cruel and such a huge contributor to climate change